Control and audits
The Board’s report on internal control regarding financial reporting
The purpose of internal control over financial reporting is to insure that the financial reports are reliable and follow generally accepted accounting principles and otherwise follow applicable laws and regulations concerning listed companies. According to the Swedish Companies Act and the Code of Corporate Governance the Board is ultimately responsible for an effective, functioning internal control in the Group. Internal control is based on the framework for internal control published by COSO (Committee of Sponsoring Organizations of the Treadway Commission) and which comprises the control environment, risk assessment, control activities, information, communication as well as follow-up. The Chief Executive Officer is responsible for an organization and processes that ensure the quality of financial reports to the Board and the market.
Control environment
The control environment at Elanders is characterized by the proximity between Group Management and the operating units. All members of Group Management, except the Chief Executive Officer and the CFO are also MDs in one or more of the larger operative units in the Group. The framework for internal control regarding financial reporting in Elanders consists of routines and distribution of responsibility that are clearly communicated in internal policies and different kinds of manuals. The Board has adopted a formal work plan that regulates the Board’s responsibility and the manner in which work is done in committees. The Board also has an audit committee that is responsible for ensuring that established principles in financial reporting and internal control are complied with and developed. It also maintains regular contact with the external auditors. In order to maintain an effective control environment and good internal control the Board has delegated the practical responsibility to the Chief Executive Officer and established a CEO instruction which defines the division of responsibility between the Board and the Chief Executive Officer.
Risk assessment
It is the responsibility of the Board to identify and handle any major financial risks and the risk of mistakes in financial reporting. This includes identifying areas in financial reporting where the risk of making a crucial mistake is higher as well as developing control systems to prevent and discover these faults. This is primarily done by identifying situations in operations and events in the outside world that could have an impact on financial reporting.
Control procedures
The aim of the control procedures is to ensure that financial reporting is correct and complete and that it is based on the Group’s minimum requirements for internal control over financial reporting. Control procedures consist of general and detailed controls and can be both preventive and detective. For instance, the Board continuously follows developments in the operations through monthly reports containing detailed financial information as well as the CEO’s comments on operations and result and financial position. Group Management or representatives from Group Finance regularly visit each unit and evaluate internal control and financial reporting. The MD in each subsidiary is responsible for making sure Group governance regulations are implemented and followed and that any deviations are reported. Companies in the Elanders Group make annual evaluations of how internal control functions in relation to the Group’s goals. In this year’s evaluation several areas there improvements have been made were identified as well as areas where further improvements are necessary. Measures were taken to make these changes.
Information and communication
In order to make Elanders employees aware of the Group’s policies and manuals the information is available on the Group intranet. Information is also regularly communicated via internal newsletters. To ensure that information communicated externally is correct and complete the Board has adopted an Information policy that dictates what should be communicated, by whom and how the information should be released.
Follow-up
The Board follow-up of the internal control over financial reporting is first and foremost handled by the audit committee. The observations and potential areas of improvement in internal control that have been identified in the external audit are processed by the audit committee together with the external auditors and the CFO. The annual evaluation of internal control in each individual company is reviewed by Group Finance, sometimes in cooperation with the external auditors. Conclusions from this review have been reported to the audit committee.
Special audit function, internal audit
Elanders does not have a special internal audit function at the moment. This function is performed by Group Management and Group Finance, supported by the audit committee and the external auditors. The Board annually evaluates the need for an internal audit function but so far, considering the size of the Group and Group Management’s operative character, it does not believe a special audit function would be of any significant advantage. A continuous dialogue between the company and the external auditors together with the controls carried out by Group Management is considered sufficient to ensure that internal controls are kept on an acceptable level. This assessment is regularly evaluated and the matter will be tested once again in 2012.
External audit
The Annual General Meeting 2012 chose for period until the next Annual General Meeting the authorized public accounting company PricewaterhouseCoopers AB. Head auditor is the authorized public accountant Johan Rippe. Once a year the auditors meet the Board in its entirety without the CEO or any other member of Group Management present, normally at the meeting that deals with the annual accounts. The auditors also participate in the Board meeting dealing with the report for the first nine months of the year.
Last updated:
5/4/2012
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